EPAS REGULATORY TRAIN WRECK: STRATEGIES FOR STATE LEGISLATORS

REGULATION OF GREENHOUSE GAS EMISSIONS (GHGS) WHAT IS IT?

The U.S. Environmental Protection Agency (EPA) is moving full steam ahead on regulating GHGs under the Clean Air Act (CAA). The principal human emitted GHGs include carbon dioxide, methane, nitrous oxide, and fluorinated gases. The EPA blames these gases for the increase in global temperature over the past 100 years. EPA finalized first-ever rules for reducing GHGs from automobiles and light-duty trucks in May 2010, and has moved to implement a program of regulating GHGs from stationary sources on two different tracks throughout 2011 with final rules expected in 2012. V regulations, the power plant NSPS regulations will govern new and upgraded facilities as well as existing facilities, whether or not they upgrade. Thus, the NSPS regulations are a key tool for EPA to get at the existing fleet of coal-fired electric generating facilities. As noted, EPAs first step in its planned GHG program is regulation under the PSD and Title V permit programs. The initial target of this program is large industrial, electric generation and manufacturing facilities; over time, EPA plans further rulemaking to expand the universe of regulated facilities. Because the economy runs on fossil fuels and because carbon dioxide is the inevitable byproduct of combusting fossil fuels, EPAs claim of authority to regulate GHGs gives it an unprecedented ability to control virtually every facet of American life. EPA is considering regulation of everything from ships and boats, to planes, cars and trucks, agricultural facilities, mining, movable equipment of every stripe (from forklifts to lawnmowers), and more regulations on manufacturing and industrial facilities, and commercial and industrial buildings.

BACKGROUND
EPAs GHG permitting program, which applies to new and substantially upgraded sources that emit GHGs above certain thresholds, began on January 2, 2010. This covers pre-construction permits under the Prevention of Significant Deterioration (PSD) portion of New Source Review as well as operating permits under Title V. EPA is poised to roll out GHG New Source Performance Standards (NSPS) for power plants and refineries in 2012. In late December of 2010, EPA announced that it had settled litigation with states and environmental groups, agreeing to propose GHG performance standards for fossil fuel power plants in July of 2011 and petroleum refineries in December of 2011. Both of these deadlines have been delayed by EPA into 2012. In the settlement, the EPA committed to final rules for both types of facilities by May 26, 2012. Critically, unlike the PSD and Title

WHO IS AFFECTED?
Energy is the lifeblood of the economy. Everything Americans buy, consume, produce, and transport requires energy. This means anything that uses or requires energy to be produced will increase in cost. The EPA failed to study the overall cost of its GHG regulations but estimates from a variety of perspectives suggest a substantial price tag.

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EPAS REGULATORY TRAIN WRECK: STRATEGIES FOR STATE LEGISLATORS

REGULATION OF GREENHOUSE GAS EMISSIONS (GHGS)

Dr. Roger Bezdek of the economic research firm Management Information Services, Inc. compiled a variety of analyses on GHG regulation, concluding that the EPA approach would: Reduce Gross Domestic Product every year for the next two decades, with GDP dropping $500 billion by 2030; Reduce U.S. employment, culminating in the loss of 2.5 million jobs by 2030; Reduce U.S. household incomes, with average household income dropping by about $1,200 annually by 2030; Increase U.S. energy costs, with increases of 50 percent for gasoline and residential electricity prices, 75 percent for industrial electricity prices and residential natural gas prices, and 600 percent for electric utility coal prices. Chinas faster growth of electricity demand comes from more than 70 percent coal-fired generation). Even based on EPAs own analysis, unilateral American reduction in GHGs has a negligible impact on atmospheric concentrations. Third, there is a significant risk that carbon leakage (in which energy-intensive industries shift production overseas to avoid costly regulation) will wipe out even the modest effect estimated by EPA. Essentially EPA regulation of GHGs is all cost and no benefit.

TAKE ACTION
ALEC model legislation that addresses GHG regulation: Resolution opposing EPAs Regulatory Train Wreck State Regulatory Responsibility Act Resolution in Opposition to the EPAs Greenhouse Gas Tailoring Rule and the treatment of biomass energy Resolution in Opposition to EPAs Regulation of Greenhouse Gases from Mobile Sources Resolution in Opposition to EPAs Plan to Regulate Greenhouse Gases Under the Clean Air Act Resolution in Opposition of Carbon Dioxide Emission Standards Write focused, joint letters to members of Congress Write an op-ed or pursue other press opportunities highlighting the impact of this regulation. For more information about the EPAs Greenhouse Gas Regulation, contact Todd Wynn, Director of ALECs Energy, Environment and Agriculture Task Force, at 202.742.8542 or twynn@alec.org

WHY IS THIS UNNECESSARY?

There are three major reasons that suggest that, even if things to according to EPA plans, the impact on GHG emissions will be minimal. First, the EPA admits that their CAA requirements will only achieve at best a 5 percent reduction in U.S. GHGs, a drop in the global climate bucket. EPAs Federal Register entry accompanying the rule regulating GHG emissions from new cars and light-duty trucks found that: [G]lobal mean temperature is estimated to be reduced by 0.006 to 0.015 [degrees] C by 2100 and sea-level rise is projected to be reduced by approximately 0.06 0.14 cm by 2100. As the minority staff of the Senate Environment and Public Works Committee notes, [t]his amount is so miniscule it cant even be measured by a ground-based thermometer. Second, growing, unmitigated emissions by developing countries will overwhelm even the most severe unilateral GHG reductions. U.S. emissions are likely to remain relatively flat, while developing country emissions will grow exponentially over the next century (further compounded by the fact that

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EPAS REGULATORY TRAIN WRECK: STRATEGIES FOR STATE LEGISLATORS

LOST GROSS DOMESTIC PRODUCT DUE TO CLEAN AIR ACT REGULATION OF CO2
Annual change in gross domestic product, in billions of dollars
2015
0 $100 $200 $300 $400 $500 $600

2020

2025

2029
SOURCE: Center for Data Analysis, Heritage Foundation calculations from the Global Insight macroeconomic model.

JOB LOSSES DUE TO GREENHOUSE GAS REGULATION

Study Legislation analyzed (Proxy for EPA GHG Regulation) H.R. 2454 H.R. 2454 H.R. 2454 H.R. 2454 Kerry/Lieberman American Power Act Kerry/Lieberman American Power Act Year of Impact Fewer Jobs

Energy Information Administration National Black Chamber of Commerce National Association of Manufacturers/ACCF Heritage Foundation Institute for Energy Research ACCF/Small Business & Entrepreneurship Council

2030 2050 2030 2035 2050 2030

2.3 Million 3.6 Million 2.44 Million 2.5 Million 5.1 million Up to 1.9 million

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